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Best Buy Taking Control of Mobile Division for $1.3B

Monday Best Buy said that it's purchasing British partner Carphone Warehouse Group Plc's half of their Best Buy Mobile joint venture in the United States and Canada for $1.3 billion. The electronics retailer is also nuking plans to open a chain of European megastores, a move which mirrors its previously dropped plans to launch a chain of stores in China and Turkey earlier this year.

"For Best Buy to be able to no longer have to share 50 percent of the profits of a high-margin, fast-growing business with Carphone Warehouse, from my perspective, is a real positive," said BB&T Capital Markets analyst Anthony Chukumba.

But Chukumba also points out that the buyout isn't a "game changer," that Best Buy still has the same challenges it faced 24 hours ago. "Fairly weak product cycle particularly in flat-panel TVs, increasing competition from Amazon, probably too much retail square footage," he said.

According to Best Buy, the company will be able to add 35 to 40 cents to its fiscal 2013 earnings by taking full control of Best Buy Mobile and closing the British megastores. The one-off cost of both actions, plus a non-cash impairment to write down goodwill, was $2.6 billion, the company said Monday.

Best Buy originally bought 50-percent of Carphone's retail operations for about $2.1 billion back in 2008. The company wanted to tap into the British firm's expertise in mobile phones and use the new acquisition as a "springboard" for expanding the Best Buy brand all across Europe. And while the company's U.S.-based phone business "exceeded expectations," low brand recognition and weak consumer spending in Europe led Best Buy to cancel its plans for European megastores.

But Best Buy isn't pulling out of Europe completely... at least, not yet. The company will reportedly focus its European efforts on Carphone's existing smaller format stores, aka Best Buy Europe. According to a formalized agreement, Best Buy has the right to buy Carphone's 50-percent stake from March 2015. If the company doesn't make a purchase, then Carphone has the right to purchase Best Buy's stake at a 10-percent discount to fair market value.